The S&P 500 looked on track for its worst weekly performance since April of last year after a post‑election market rout rippled across global markets, driven by renewed doubts over the sustainability of the AI investment theme.
U.S. tech bore the brunt of the selloff. The Nasdaq plunged more than 5.5% on Wednesday, pushing the index into correction territory and prompting investors to reassess lofty valuations attached to AI beneficiaries. The shock waves spread overseas: European and Chinese equities fell roughly 1.5%, while Japan slumped nearly 6% following the sharp declines in U.S. trading.
The rotation out of long‑duration growth names has produced pockets of relative strength. European real estate and utilities — sectors with steadier cash flows and lower duration risk — have so far benefited as investors seek safer yield exposures amid heightened volatility.
Credit markets are already pricing in project risk tied to the political backdrop. Bloomberg reported that ING is marketing about $500 million of data‑centre loans, reflecting concern that a Democratic sweep in the U.S. midterms could slow approvals and construction of large tech campuses. Industry estimates suggest roughly 40% of planned U.S. data‑centre capacity lies in states where popular opposition to new projects is strong, amplifying potential delay risk.
Macro data presented a mixed picture for markets. German industrial production rose 0.7% in September — marking a second consecutive monthly gain and bolstering hopes for a broader turnaround after prolonged stagnation. Still, bond markets positioned for further Treasury gains into Friday’s October employment report as traders pared back expectations for additional Federal Reserve hikes.
Futures trading showed tentative signs of stabilization: Nasdaq futures climbed about 1% as traders attempted to stage a recovery from steep losses, while Brent crude held near $98 a barrel. With earnings season and U.S. payrolls data looming, investors now face a volatile intersection of political risk, sector rotation and macro releases that could dictate whether this correction deepens or proves short‑lived.
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